THE THREE ENVELOPES

Just after I was appointed to the role of IT Manager at International Harvester NZ about 40 years ago, a colleague told me a story that highlighted the tenuous nature of management roles.

It involved the removal of a CEO by his board after the company had delivered a number of years of unspectacular performance, and his replacement by a new, younger recruit from their industry.

CEO sign on desk

On his last day, the departing CEO was clearing out his office when the replacement CEO arrived unexpectedly. After exchanging some mild pleasantries along the lines of “no hard feelings” and “it’s not personal”, the new CEO asked his predecessor whether he had any advice to share. The departing CEO handed him 3 numbered envelopes with the instructions that they should be opened in sequence if all else failed.

The new CEO threw himself into his new role. He visited the remotest parts of the company, listened to all opinions from every level of management, spent time with the engineers and on the shop floor, spoke to customers and suppliers, and after 12 months he felt that he had a real understanding of the company and the issues that it faced. His only problem was that he didn’t have a clear idea of what he had to do to bring the company back to competitive strength.

He then remembered the 3 envelopes in his desk drawer and opened the first one. It said “Blame your predecessor”.

He took the advice, and at the next board meeting told the board that after 12 months of in depth study he had come to the conclusion that his predecessor had been the problem, and that to save the company he would now have to go about changing everything that his predecessor had implemented during his tenure. This pleased the board as it supported their decision to remove the previous CEO, so they quickly allocated significant budget and resources to the CEO to effect the changes proposed.

Armed with this mandate, the CEO spent the next year changing every element of the company’s business processes both internally and externally. Unfortunately, even after all these changes, the company’s fortunes had not significantly improved.
Out came envelope number 2. It said “Reorganise”.

Armed with this new strategy, he reported at the next board meeting that now that they had totally changed the way the company worked, the current structure did not fit and that they would now have to go through a total global restructuring. Again the Board was thrilled that their CEO was so dynamic and once again voted him significant budget and resources to effect the changes.

After another 12 months of turmoil, and when things had still not improved, he opened the final envelope. It said “Prepare 3 envelopes”.

CEO sign on desk, close up, man in background

I recently saw a report from Price Waterhouse that said that the average tenure of a global CEO today is about 2.7 years. This means that few CEOs today are ever really tested, as they don’t serve long enough in the role to actually have to live with their decisions, directions and implementations.
I guess that just like art imitating life and vice versa, we have now reached a point in the business world where life actually imitates humour.

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4 Responses to THE THREE ENVELOPES

  1. Maureen O'Shea says:

    And of course the board’s and shareholders’ short term share price expectations drive the entire process. Boards need to grow some xxxxs and return to longer term, strategic thinking. Focussing on maximising immediate returns is exactly the mentality that caused the GFC … Greedy Finanicial Crisis.

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  4. kitchens says:

    Every time I stumble upon a good blog post I usually do three things:1.Share it with my close contacts.2.keep it in all of the best bookmarking sites.3.Be sure to visit the same website where I came accross the post.After reading this post I’m seriously thinking of going ahead and doing all three.

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